Market Commentary – July 2018
“Without loyalty you have nothing – you are nothing”
Seeing as I launched my new firm, Koa Wealth Management June 22nd of this glorious year – two thousand and eighteen – I want to first of all give a heartfelt “Mahalo” or “Thank You” to all of my clients who have decided to follow me into this world that I have embarked upon. Relationships are funny, in that you never know the value, strength and fortitude of something until you put it to the test. Without a shadow of a doubt, I know who my top clients are and who are the people that value what I do for their families. Equally important I now know and realize which clients care about my family. Without my clients – I have no business – it’s not complicated – something I know has not been lost on my clients. My practice is how I provide for my five children – something I have always taken seriously. For these people I will run through walls till the end of my days as a professional in this business – as my father once told me, “Without loyalty you have nothing – you are nothing”. Today I feel like a very wealthy man, not for what my bank account may state, but that I have a village of people who trust that I will continue working to take care of them, guide them and move them toward their respective promised land – that is worth the world to me.
To the markets – a certain Social Media Platform this week reminded us, if you don’t preannounce disappointing news and don’t give the market what it expects no company is immune from getting their head handed to them. While we own this company from a much lower level, the hubris of management not to preannounce that their margins and growth trajectory are coming way down is something not to be forgotten. In my view, large tech companies have become so powerful, they are running logger heads with what’s beneficial to society and governments are taking notice (See recent EU fines!). No matter your level of success – stay humble and look after your shareholders. We may consider selling this name down significantly on a future bounce up in price.
I’ve had a few clients in recent weeks raise concerns about our tariff spat with our trading partners. While I am all about free trade, competition, etc. – I wonder if investors have noticed that the US equity indices have been steadily moving higher, while those of China, Europe, etc. have been down to sideways? The market is not always a perfect discounting mechanism, but tariff news is widely known at this point and at least from what the equity markets are telling us, the US may come out on the right side of all this. As we know the winds of equity markets are always apt to change and quickly/violently – but so far what I am evidencing keeps me hopeful.
Second Quarter GDP came in at 4.1% announced earlier this morning – we haven’t seen a 4% or better print since we have come out of the recession. While on the surface this number looks fantastic, my fear is this may be the peak growth number for the cycle. With employment very full/wages on the rise, interest rates trying to drift higher, tax cuts already filtering through the economy… how much better can it get from here? Remember equity markets don’t move higher off of absolute numbers so much as they do rate of change – if the economy cannot continue to get better in subsequent quarters, it may be apt to get worse. Seeing as we still have a positively sloped yield curve I still believe an economic recession sits as a 2020 worry, we will be ever watchful at the level of equity exposure our clients carry moving forward. We believe the trick to protecting our clients wealth is to do our best to participate in the rallies, but not to bear the brunt of losses when they eventually occur – with the lack of negative returns in recent years, statistically speaking the odds of a negative year for equities increases as we move forward.
Securities offered through M.S. Howells & Co. Member FINRA/SIPC. Advisory services offered through Koa Wealth Management. M.S. Howells & Co. is not affiliated with Koa Wealth Management.
Koa Wealth Management
11260 El Camino Real, Unit 220, San Diego, CA 92130